New independent modelling shows that removing negative gearing completely would see over three quarters of Australian households better off and would be a boon for new home ownership.

The research paper prepared for the RBA Workshop by University of Melbourne academics finds that removing negative gearing would see home ownership increase by 5.5 percentage points, with poorer households to be the largest beneficiaries, some age cohorts seeing ownership rates soar by more than 12 percentage points.

The paper notes explicitly that under the complete removal of negative gearing “allocation of housing stocks shifts from the high income to low income households” [page 27].

While this paper models the total removal of negative gearing – not Labor’s full grandfathered policy that retains negative gearing for new supply – it does indicate that the majority of Australians will be worse off if negative gearing as it currently stands remains in place.

This new research follows the revelations this week that the Federal and New South Wales Liberal Governments ignored the advice of their respective Treasury departments in favour of continuing a pathetic and ill-informed scare campaign against Labor’s reforms to negative gearing and the capital gains tax discount.

Other key findings from the research:

“…the policy essentially benefits the rich households who borrow and speculate in the property market.” [page 7]

“…removing negative gearing increases the average homeownership rate of the economy from 66.7 percent to 72.2 percent” [page 25]

“[Without negative gearing] The improvement in homeownership is observed most predominantly among poor households” [26]

“the group of households hurt by the policy change is landlords who are young and rich” [36]

This is yet further research which supports reforms to negative gearing to help improve housing affordability.

Labor continues to be the only major party with a set of housing affordability policies which will help level the playing field between first home buyers and property investors.